Shareholders set to clean up venture capital trusts

The UK Shareholders Association has launched a campaign to oust the managers of underperforming Venture Capital Trusts (VCTs), and improve standards of corporate governance across the industry.

The UK Shareholders Association has launched a campaign to oust the managers of underperforming Venture Capital Trusts (VCTs), and improve standards of corporate governance across the industry.

VCTs - which are funds that invest in start-up and early stage companies, offering tax breaks for investors - were launched nine years ago to help encourage investment in new businesses.

While the generous tax breaks mean the funds did not have to perform exceedingly well for investors to receive a good return, several of the trusts have performed abysmally - still worth less than they were at launch after more than a decade.

The UKSA says its first target is Quester Three, which was launched in April 2000 and is down almost 17 per cent since then, according to data from Tax Efficient Review.

Roger Lawson, a spokesman for the UKSA, says the group has already written to all of the trust's shareholders asking for their support, and plans to table several motions to try and improve standards at the next annual general meeting.

"We're going to target the worst trusts, starting with Questor Three," he said. "And then we'll probably move on to look at some of the Murray ones."

The Murray VCTs, which are now owned by Aberdeen Asset Management, are among the worst performers in the VCT universe.

The first Murray trust, which was lunched in September 1995, has lost investors more than 40 per cent of their investment after nine years, even after taking dividends into account. In contrast, the best performer, Close Brothers VCT, has delivered a positive total return of 75 per cent over roughly the same period.

Murray Two, which was launched in 1997, and Murray Three, which was launched in 1998, have both lost shareholders around 25 per cent since launch.

Governance standards are slowly improving in the VCT market. Earlier this year, Downing - a promoter of VCTs - sacked Classic Fund Management as the manager of three of its poorly performing VCTs.

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